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| Covered Call Basics |
Q: What is a covered call?
A: A bullish-to-neutral option strategy requiring the simultaneous purchase of a stock and the selling of a call option against the underlying stock.
Q: How does PowerOptionsApplied use covered calls?
A: New recommended covered call positions are published the Monday and Tuesday following options expiration (3rd Friday of the month). Generally, the positions are called away and exhibit a profit in less than one month. Profits are realized from the premium retained from selling the call option and in some cases profits are also realized from the appreciation in the price of the purchased stock.
Q: What are the risks associated with covered call trading?
A: In the event the stock of a covered call positions drops in price, the position may experience a loss. Generally, in this case, the call option expires worthless and the stock remains in the investors account. Typically a new call option will be sold against the remaining stock, and many times the position can regain profitability from subsequent rolling of the position.
Q: How much money can I make?
A: Our research-supported trades aim to help you realize a profit. Total profits are proportional to the size of the investment. Please see our Track Record for past performance details. Remember: Past performance is not an indicator of future performance.
Q: How much money do I need to trade a covered call?
A: For each covered call position, the minimum capital required is the price of the stock purchased multiplied by 100 (#shares in an option contract). The average price of the stocks selected is $35, so most positions will require around $3,500 to be available in your brokerage account for trading.
Q: How do I win or lose with a covered call position?
A: As long as the stock price at options expiration is the greater than or equal to the original price when purchased, the position will be profitable. In many cases, the stock can even decrease in price and still experience a profit. If the stock price decreases significantly, then the position may experience a loss.
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Covered Calls - Covered Call Trading
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